The Real Deal New York

Anbang to buy stake in Kushner’s 666 Fifth, valuing tower at $2.85B

Chinese insurer will take out $4B loan for condo conversion.

From left: Jared Kushner, 666 Fifth Avenue and Anbang’s Wu Xiaohui

Anbang Insurance Group TRData LogoTINY is buying a stake in Kushner Companies and Vornado Realty Trust’s 666 Fifth Avenue in a deal that values the office tower at $2.85 billion. The Chinese insurer is also seeking a $4 billion construction loan to turn the building’s top floors into luxury condominiums, according to Bloomberg. That loan, if received, would be the largest-ever construction loan for a single property in New York.

Documents sent out to prospective investors claim the finished building will be worth $7.2 billion, according to Bloomberg. It’s not clear how Kushner Companies arrived at that figure – the GM Building, long considered the most valuable office tower in the U.S., is valued at just $3.4 billion.

“Kushner Companies is in active discussions around 666 5th Avenue, and nothing has been finalized,” a Kushner spokesperson told The Real Deal.

Kushner Companies will keep a 20-percent stake in the 41-story, 1.5 million-square-foot property and get $400 million in cash from Anbang. Vornado, which bought a 49.5-percent stake in the then-distressed office component in 2011 for $85 million and took over the tower’s retail space a year later, will sell its stake for a ten-fold profit in the office component and a doubling of its investment in the retail, according to Bloomberg. Anbang and Kushner are seeking for further equity partners to pump another $100 million into the new partnership.

The new partnership will refinance a $1.15 billion mortgage and seek to raise $850 million in EB-5 funds for the condo conversion – among the largest-ever sums sought for a single property.

“This is a huge, huge exit strategy for an office building,” Joshua Stein, a real estate attorney told Bloomberg. “It does sound like a home run of a transaction for Kushner and his group.”

The EB-5 program, which grants visas to foreigners who invest in certain real estate projects, is up for renewal but faces heated opposition from both parties. Jared Kushner, who left the family company in January to join the White House as an adviser, said he will recuse himself from talks about the visa.

According to a report in the New York Times, Jared Kushner played a key role in the talks with Anbang before he left the company. On November 16, Kushner and Anbang’s chair Wu Xiahui had a private dinner at the Waldorf Astoria Hotel where they toasted Trump’s victory.

Kushner bought the building for a record $1.8 billion in 2007, but struggled to hold on to the building in the wake of the global financial crisis. The tower’s annual debt cost was once as high as $78 million, while net operating income declined from $57 million in 2007 to $28 million in 2011, according to a 2012 TRD analysis. Vornado’s $80 million investment allowed the Kushners to hold on to the tower and renegotiate its debt, cutting annual payments to less than $30 million. When Kushner sold the retail condo to Vornado half a year later for $707 million, the company made an estimated profit of $100 million.  [Bloomberg]Konrad Putzier